ILLEGAL PROFITS.

New Zealand Herald, Volume LXIX, Issue 21164, 22 April 1932, Page 6

ILLEGAL PROFITS.

SUBJECT TO INCOME TAX.

BRITISH JUDGE'S DECISION. DISMISSAL OF AN APPEAL. [from our own correspondent.] LONDON, March 15. Mr. Justice Rowlatt has decided that illegal profits are subject to income tax. Mr. E. Mann, an, amusement caterer, appealed against an assessment in respect of profits from the use of automatic machines called "fruit or ' diddler machines, which he had supplied to piers, licensed premises, and other places. As a result of a decision that the machines were illegal, Mr. Mann sold those he owned. I-Ie had not. been convicted in respect of their use. Mr. Justice Rowlatt asked whether, if a man's "business or vocation" were that of a smuggler, he would have to state that on his income tax return. He also envisaged a Chancellor of the Exchequer resigning because an AttorneyGeneral insisted on prosecuting lucrative criminals. "That," he said, "would be a magnificent political crisis." (Laughter.)

The revenue authorities, stated Mr. Justice Rowlatt, yrhile claiming tax on the profits made, did not identify themselves with the making of the profits.

Counsel for Mr. Mann: But they do Eeek to share them. Counsel for the Crown said there \\as an element of humour in a person coming to the Court and saying, "I am a criminal, and on constitutional giounds I object to your getting my profits from ES."

'Mr. Jus':ice Rowlatt, in the course of xiis judgment, said that he could not see why this letting out of machines in a commercial way with a view to the receipt of profits in a commercial way was not a trade the profits of which were chargeable to tax. He thought that thev were The question was whether the" words of the definition of trade were cut down by any over-riding consideration of illegality. The mainstay of the argument of appellant's counsel was the Irish case of Haves v. Duggan, in which it

was held that no construction was to be adopted which involved that the State' should come forward and claim a profit from that which the State had prohibited and ought to have prevented. It was sa:d rather rhetorically in that case:—'Will the Executive keep its revenue eye open and vigilant and its eye of justice closed to crime if the crime be lucrative ?" He did not see why it should not huve kept both eyes open, claiming its tax on the profit!) and taking criminal proceedings at th° same t:me. But the view of the matter expressed in Hayes v. Duggan was. m his opinion, misconceived. Ihe State was merely looking at an accomplished fact, not condoning or taking part in it. It saw profits from a trade and said: "Give us our tax." The Judge said he could not see that the State was alleging its own turpitude; it was the appellant who was alleging his own turpitude. Nor was the State taking a share of unlawful gains; it was merely claiming tax which was due. He had come to the conclusion that the revenue was right. The appeal was dismissed, with costs.